Bitcoin nonfungible tokens (NFTs) have captured the crypto world’s attention fast, opening new opportunities for the oldest blockchain and digital art
Bitcoin nonfungible tokens (NFTs) have captured the crypto world’s attention fast, opening new opportunities for the oldest blockchain and digital art enthusiasts. Since their explosion in 2020, NFTs have been typically minted and traded on Ethereum-based platforms, besides other blockchains, such as Cardano and Solana.
However, a new protocol known as Ordinals was launched in January 2023 by former Bitcoin Core contributor Casey Rodarmor, who exploited the 2021 Bitcoin Taproot upgrade to expand the cryptocurrency capability and enable on-chain Bitcoin-native NFTs.
Taproot offered a way to expand the base layer’s block capability by condensing the size of transactions requiring less data usage and encouraging the use of smart contracts on Bitcoin. The upgrade considerably increases the types of transactions possible on Bitcoin, including decentralized finance (DeFi) and NFT applications.
By February 2023, the world’s largest issuer of NFTs, Yuga Labs, had already announced the creation of TwelveFold, a new NFT collection issued on Bitcoin, thereby endorsing Bitcoin NFTs and avouching their success.
Here’s what you need to know about Bitcoin NFTs, how they differ from the most popular Ethereum-based alternative, and how to create and sell them.
What are Ordinals?
Ordinals are serial numbers imprinted in a single, unique satoshi (sat), the smallest unit of Bitcoin (BTC), through the ordinal theory that assigns them in the order in which they are mined. The first satoshi in the first block has the ordinal number 0, the second has the ordinal number 1, and the last satoshi of the first block has the ordinal number 4,999,999,999.
Colored coins were the first representation of such a concept back in 2012, being crypto assets repurposed to represent something of value by adding metadata information. Counterparty is another attempt to embed data into regular Bitcoin transactions. However, it has its own XCP token, required for some functionality, making it officially like an altcoin and not an extension or second layer for Bitcoin.
The ordinal theory rewards satoshis with numismatic value, allowing them to be collected and traded as rarities. Satoshis are given individual identities to be tracked, transferred and ingrained with meaningful arbitrary data, such as pictures, text or videos, through a Bitcoin transaction that remains permanently part of the blockchain. Such data can be viewed in Ordinals-compatible wallets, such as the Sparrow wallet, and online explorers.
Inscriptions
The process of assigning assets to individual satoshis is called inscription. Inscriptions are digital artifacts native to the Bitcoin blockchain, the digital equivalent of physical artifacts.
They are fully on-chain, do not require a sidechain or a separate token, and use the Ordinals protocol to inscribe sats with content on ord, an index, an explorer and a wallet that relies on Bitcoin Core for private key management and transaction signing.
Ord allows tracking the location of specific satoshis and their ordinal numbers and can be viewed with the Ordinals explorer. In contrast with traditional NFTs that rely on off-chain content stored on the interplanetary file system (IPFS), inscriptions are gifted with Bitcoin’s immutability and security. They are permissionless and uncensorable digital artifacts since they can be sold without a royalty.
How to create Bitcoin NFTs
The Ordinals ecosystem is in full development, but its accessibility is still restricted to two primary ways to mint an ordinal NFT.
The first method to inscribe Bitcoin Ordinals requires some technical skills, running a full Bitcoin node and then installing Ord on this node to inscribe satoshis into an Ordinals wallet and make Bitcoin Ordinals NFTs. Two types of Bitcoin wallets can process Ordinals; they both must be Taproot-compatible and have a “coin control” capability to avoid spending Ordinal satoshis as network fees or sending them accidentally in another transaction.
- The Sparrow wallet is only recommended for receiving Ordinals to avoid sending Ordinals sats inadvertently. However, using it does not require running a full node. Here’s how to set up a Sparrow wallet.
- An Ord wallet requires running a full node on 500GB capacity. Unlike the Sparrow wallet, an Ord wallet allows you to create inscriptions and freeze the inscribed sats to prevent accidental spending. Here’s how to set up an Ord wallet.
Regardless of the wallet you’re using, make sure to have some Bitcoin available to pay for the transaction fee.
The second method is more straightforward and involves using a no-code tool, such as Gamma or Ordinalsbot.com, to inscribe your ordinal NFT. Here’s how to mint your Ordinal on Gamma:
- Select the type of file you’d like to use to mint your Bitcoin NFT.
- Upload the necessary file from your computer.
- Set up the transaction fee depending on how long you’d like to wait for your Ordinal to be minted.
- Copy and paste the Bitcoin address where to send the…
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